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In test cases of national importance, today's ruling at the Court of Appeal will decide whether "bedroom tax" regulations, introduced last April, are an "excessive and unfair burden" on people with disabilities, or a lawful and "integral aspect" of the Government's deficit reduction programme.

Backed by the Equality and Human Rights Commission, lawyers for five tenants are arguing that the regulations cannot be allowed to stand.

The Department for Work and Pensions rejects the "bedroom tax" tag and says the reality is a "spare room subsidy" has been removed from social sector tenants.

The change in regulations is expected to produce savings of £500 million a year, but opponents say they have had a "devastating" impact on many people and fail to reflect the actual needs of disabled people for extra space.

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Labour has accused the Government of understating the number of council tenants who have been wrongly hit by the so-called 'bedroom tax' changes to housing benefit.

The opposition party said local authority data showed that, as a result of a loophole in the legislation, at least 16,000 households had wrongly had their benefit cut - while the true figure could be closer to 50,000.

Labour has accused the Government of understating the number of council tenants who have been wrongly hit by so-called 'bedroom tax'. Credit: Press Association

Work and Pensions Secretary Iain Duncan Smith has previously told MPs that between 3,000 to 5,000 tenants were thought to have been affected by the error.

But after submitting Freedom of Information requests to all 346 local authorities in the UK, Labour said responses from the 140 councils which have so far replied showed that 16,450 households had been incorrectly caught.

Shadow work and pensions minister Chris Bryant said that if there was a similar rate of wrongful deductions across the whole country, the final total would be almost 50,000.

Labour MP for Glasgow South West Ian Davidson claims the committee has identified "glaring flaws" in the scheme. Credit: PA

The chair of the Scottish Affairs Committee has labelled the Government's so-called "bedroom tax" as a "cruel burden", saying it's "designed to hit the poorest".

The committee has called for the scheme to be suspended for claimants who cannot reasonably be offered alternative accommodation.

Chairperson and Labour MP Ian Davidson said: "This is an interim report because, while the impact of the bedroom tax cannot yet be fully quantified, it is already clear that it is a cruel burden being placed upon the shoulders of those least able to bear it."